One of the largest U.S. private cable operators has filed for Chapter 11
bankruptcy protection under a cloud of controversy, with one of its shareholders
claiming that the bankruptcy is merely a ruse to avoid a lawsuit.
WSNet Inc., an Austin, Texas-based private cable operator and provider of
satellite-video programming to small cable operators, filed for Chapter 11
protection in U.S. Bankruptcy Court for the Western District of Texas Oct. 24,
after its primary lender literally cleaned out its bank account.
According to bankruptcy documents, WSNet has about 750,000 subscribers, the
vast majority of which are private cable operations in multiple-dwelling units.
The company listed assets of between $10 million and $50 million and liabilities
of between $50 million and $100 million.
Court documents stated that WSNet's primary lender, Digital Satellite Lenders
LLC, exercised its right to empty its bank accounts of $8 million Oct. 17 after
the company had defaulted on certain covenants on its loans. That, in turn,
triggered additional defaults on other company debt and prompted the bankruptcy
filing.
In court testimony Oct. 31, WSNet chief financial officer Randy Jonkers
testified that WSNet had defaulted on revenue, cash-flow and subscriber-growth
covenants under its loans from Digital Satellite. WSNet had been in default of
those covenants since January, he added.
Since the bankruptcy filing, Digital Satellite has agreed to provide $2
million in debtor-in-possession financing for WSNet, which matures Jan. 31, or
less than 90 days after its issuance.
WSNet chief operating officer Stuart Lefkowitz said he could not comment on
the reasons for the bankruptcy, but he said the company is continuing to provide
service.
